TOPIC:

Identify an Indian company that has

issued ADRs or GDRs.
Explain the process followed by the
company in issuing ADRs/GDRs.
How have these ADRs/GDRs behaved?

Group Members:

Pinkesh Shah 101

Sarita Shah 102
Ishan Shet 103
Preksha Shetty 104
Sushil Shetty 105

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What is ADR
ADR is the full form of American Depository Receipts. This is the recent method
adopted by many large and well respected companies from India to raise funds
from American Markets.

ADVANTAGES OF ADRs:
There are many advantages of ADRs. For individuals, ADRs are an easy and cost
effective way to buy shares of a foreign company. The individuals are able to
save considerable money and energy by trading in ADRs, as it reduces
administrative costs and avoids foreign taxes on each transaction. Foreign entities
prefer ADRs, because they get more U.S. exposure and it allows them to tap the
American equity markets. .

The shares represented by ADRs are without voting rights. However, any
foreigner can purchase these securities whereas shares in India can be purchased
on Indian Stock Exchanges only by NRIs or PIOs or FIIs. The purchaser has a
theoretical right to exchange the receipt without voting rights for the shares with
voting rights (RBI permission required) but in practice, no one appears to be
interested in exercising this right.

What is GDR and how it operates

• The full form of GDR is Global Depository Receipt. It is not a different
financial instrument, as it may sound, from that of ADR.
• In fact if the Indian Company which has issued GDRs in the American
market wishes to further extend it to other developed and advanced countries
such as Europe, then they can sell these ADRs to the public of Europe and
the same would be named as GDR.

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How ADR Operates
• Indian companies have direct access to raise funds from Indian public by
way of issuing Shares, Debentures etc.
• However Indian companies cannot do so, in such a direct manner, when it
comes to raising funds from American people. That would entail the Indian
companies to adopt US Accounting Norms which is also called as GAAP,
maintain accounting practices as per American Financial Year (Which starts
in January and ends in December of any particular year), as also follow
variety of stringent standards as per American norms. Effectively, it would
mean that the Indian company would have to follow two different set of
rules simultaneously, one to comply with the laws of Indian Companies Act,
and the other to comply with the American Laws.
• The method to circumvent the American norms, but still raise funds from
American people is available by way of ADR or American Depository
Receipts. In this system, the Indian company deposits certain amount of its
Indian shares with designated American Banks.
• The banks, in turn, issues receipts that are equivalent in values (And also
based on the intrinsic value the Indian Company’s shares would fetch in the
American market) to the Indian Company. These receipts essentially would
be in number of receipts.
• Then these Indian Companies can trade these ADRs or American
Depository Receipts with the American public. These ADRs can be
purchased and traded freely without any encumbrances in the American
Stocks and Shares Market. This way the Indian company is able to enter into
the American Stocks and Shares market, and raise funds from the American
public.
• The role of the American bank which has issued these receipts is very
crucial, since it is they who stand guarantee to the issued receipts. Hence
they do exhaustive study of the Indian company from all perspectives, and
only then issue the ADR to the Indian company.

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Which Indian companies have ADRs and / or GDRs?
Some of the best Indian companies have issued ADRs and / or GDRs. Below is a
partial list.
Company ADR GDR
Bajaj Auto No Yes
Dr. Reddys Yes Yes
HDFC Bank Yes Yes
Hindalco No Yes
ICICI Bank Yes Yes
Infosys Technologies Yes Yes
ITC No Yes
L&T No Yes
MTNL Yes Yes
Patni Computers Yes No
Ranbaxy Laboratories No Yes
Tata Motors Yes No
State Bank of India No Yes
VSNL Yes Yes
WIPRO Yes Yes

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Guidelines for ADR/GDR issues by the Indian Companies -
Disinvestment of shares by the Indian companies in the
Overseas market through issue of ADRs/GDRs
(i) Divestment by shareholders of their holdings of Indian companies, in the
overseas markets would be allowed through the mechanism of Sponsored
ADR/GDR issue in respect of:-

(a) Divestment by shareholders of their holdings of Indian companies listed in

India;
(b) Divestment by shareholders of their holdings of Indian companies not listed
in India but which are listed overseas.

(ii) The process of divestment would be initiated by such Indian companies whose
shares are being offered for divestment in the overseas market by sponsoring
ADR/GDR issues against the block of existing shares offered by the shareholders
under the provisions of these guidelines.

(iii) Such a facility would be available pari-passu to all categories of shareholders,

of the company whose shares are being sold in the ADR/GDR markets overseas.
This would ensure that no class of shareholders gets a special dispensation.

(iv) The sponsoring company, whose shareholders propose to divest existing shares
in the overseas market through issue of ADRs/GDRs will give an option to all its
shareholders indicating the number of shares to be divested and the mechanism
how the price will be determined under the ADR/GDR norms. If the shares
offered for divestment are more than the pre-specified number to be divested,
shares would be accepted for divestment in proportion to existing holdings.

(v) The proposal for divestment of the existing shares in the ADR/GDR market
would have to be approved by a special resolution of the company whose shares
are being divested.

(vi) The proceeds of the ADR/GDR issue raised abroad shall be repatriated into
India within a period of one month of the closure of the issue.

(vii) Such ADR/GDR issues against existing shares arising out of the divestment
would also come within the purview of the existing SEBI Takeover Code if the
ADRs/GDRs are cancelled and the underlying shares are to be registered with the

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company as shareholders.

(viii) Divestment of existing shares of Indian companies in the overseas markets

for issue of ADRs/GDRs would be reckoned as FDI. Such proposals would require
FIPB approval as also other approvals, if any, under the FDI policy.

(ix) Such divestment inducting foreign equity would also need to conform to the
FDI sectoral policy and the prescribed sectoral cap as applicable. Accordingly the
facility would not be available where the company whose shares are to be divested
is engaged in an activity where FDI is not permitted.

(x) Each case would require the approval of FIPB for foreign equity induction
through offer of existing shares under the ADR/GDR route.

(xi) Other mandatory approvals such as those under the Companies Act, etc. as
applicable would have to be obtained by the company prior to the ADR/GDR
issue.

(xii) The issue related expenses (covering both fixed expenses like underwriting
commissions, lead managers charges, legal expenses and reimbursable expenses)
for public issue shall be subject to a ceiling of 4% in the case of GDRs and 7% in
the case of ADRs and 2% in case of private placements of ADRs/GDRs. Issue
expenses beyond the ceiling would need the approval of RBI. The issue expenses
shall be passed onto the shareholders participating in the sponsored issue on a
prorate basis.

(xiii) The shares earmarked for the sponsored ADR/GDR issue may be kept in an
escrow account created for this purpose and in any case, the retention of shares in
such escrow account shall not exceed 3 months.

(xiv) If the issues of ADR/GDR are made in more than one tranche, each tranche
would have to be treated as a separate transaction.

(xv) After completing the transactions, the companies would need to furnish full
particulars thereof including amount raised through ADRs/GDRs, number of
ADRs/GDRs issued and the underlying shares offered, percentage of foreign
equity level in the Indian company on account of issue of ADRs/GDRs, details of
issue parameters, details of repatriation, and other details to the Exchange Control
Department of the Reserve Bank of India, Central Office, Mumbai within 30 days
of completion of such transactions.

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(xvi) The tax provision under Section 115 AC of the Income Tax Act 1961, which
is applicable to non-resident investors for ADR/GDR offering against issue of
fresh underlying shares would extend to non-resident investors investing in foreign
exchange in ADRs/GDRs issued against disinvested existing shares, in terms of the
relevant provisions of the Income Tax Act, 1961

(xvii) Resident shareholders divesting their holdings will be subject to Capital Gain
tax provisions applicable under the Income Tax Act 1961 i.e. Section 115 AC
applicable for non-residents would not extend to them.

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 COMPANY: INFOSYS

In which stock exchanges are Infosys shares/ADRs listed

and what are the codes?

Infosys' equity shares are listed on BSE and NSE in India and its ADS is listed on
the NASDAQ in the US. The respective codes are as below

IN INDIA OUTSIDE INDIA

NSE BSE NASDAQ
EXCHANGE CODE INFOSYSTCH 5002009 INFY
REUTERS CODE INFY.NS INFY.BO INFY.O
TELERATE/ IN:INFN IN:INF US:INFY
MONEYLINE CODE
BLOOMBERG CODE NINFO IN INFO IN -

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AMERICAN DEPOSITORY RECIEPT/ AMERICAN
DEPOSITORY SHARE

• Infosys Technologies Limited (INFY : 67.13, -0.19) is scheduled to report

Q3-2011 results on Monday, January 10, 2011. In the last four quarters
ending September 2010, the company's reported EPS exceeded analysts'
consensus estimates by margins in the range of 1.79% and 13.46%.

• Infosys is a global technology services company.

• The company provides end-to-end business solutions. In addition, the
Company offers software products for the banking industry and business
process management services.
• Earnings per American Depositary Share (ADS) was $0.65 for the quarter
ended September 2010, compared to $0.56 in the year ago quarter.
• Analysts' estimates for the third quarter of 2011 range from a low of $0.63 to
a high of $0.69, compared to a consensus estimate of $0.66 or year ago eps
of $0.59.
• Analysts' revenue estimates for the third quarter 2011 range from a low of
$1.45 billion to a high of $1.61 billion, compared to reported revenue of
$1.23 billion in the same quarter a year ago. For the third quarter, the
consensus EPS forecast has remained the same over the past week at $0.660
and remained the same over the past month at $0.660. Analysts' estimates
are broadly in line with the company's guidance.
• The stock closed on Tuesday at $76.88, compared to 52 week range of
$49.55 and $77.92. In the last one year, the closing share price is gained
$20.12 or 35.45%. For the fiscal year 2011, the company expects revenue to
be in the range of $5.95 billion and $6 billion.
• Revenue expansion is expected to be driven by robust demand, particularly
in consulting and systems integration. However, the weakening U.S. dollar
relative to the rupee could affect the results. Based on the company's
projections and my adjustments thereto I forecast 2011 EPS at $2.455, and
see 2011's at $2.855. Based on these estimates and relative valuation, I set a
target price of $80.
• Each ADS or ADR represents 1 equity share.

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GLOBAL DEPOSITORY RECIEPT OF INFOSYS

• Aftek Infosys announced the completion of its global depository receipt

issue amounting to around $15 million; the GDRs were listed on
Luxembourg Stock Exchange on 7TH FEB
• Aftek had issued 13,33,100 GDRs each representing 3 equity shares of the
company at a price of $11.25 per share. The issue had opened for
subscription on January 29.
• The paid-up equity share capital of the company stands increased to Rs 10
crore from Rs 6 crore, said a news release from the company.

PROCESS INVOLVED

• The proceeds of the GDR issue will be utilised to fund investment in

complementary businesses, technologies, services, and products; or to enter
into strategic partnerships with parties who can provide access to those
assets, fund future growth and for other general corporate working capital
purposes, said the release.

USES

• The GDR issue will help the company expand its markets in the European
region. Besides consolidating its presence in its core domain areas of
embedded systems, mobile and wireless and the Web, the proceeds will also
help increase the company's shares of products and service offerings in key
technology areas of knowledge management and 3G mobile
communications, said the release

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Specimen Of ADR

ADRs give a weak performance; Tata Motors the worst hit

Indian ADRs seem not to be doing too great. Out of the 11 ADRs, 6 ADRs have
given a negative return in this calendar year. Tata Motors has topped this list of
companies. Tata Motor's ADR has given a negative return of 18.86% between Jan
3- May 23, 2007.

Tata Motors is followed by Infosys, DRL, Sify, Wipro and Satyam. These ADRs
have fallen by 11.43%, 11.33%, 10.20%, 1.83%, 1.22% respectively.

In the domestic market as well these stocks have seen negative trend with Tata
Motors again being the biggest loser. On the BSE, Tata Motor's stock has fallen by
23.87%, Infosys by 15.24%, 18.37%, Wipro by 12.49% and Satyam by 11.04%.

ADRs like Rediff.com, HDFC Bank, MTNL, VSNL, ICICI Bank and Patni
Computers, on the other hand have shown a strong growth with the biggest gainer
being Patni Computers. These ADRs have beefed by 1.50%, 9.53%, 13.70%,
16.05%, 10.13% and 23.58% respectively. And in the domestic market the stock
price of these companies have grown by 3.98%, 5.38%, 7.65%, 2.20% and 22.37%
respectively.

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Rupee appreciation is weighing strong on the IT firms with most of their ADRs
trading weak and also the domestic market not treating them too well.

The sharp rupee appreciation impacted the margins of Infosys by 200 basis points.
The management of the company is factoring in the rupee rate at 44.1 going ahead
and expects to maintain margin in a narrow band.

CFO, V Balakrishna says, "If you look at the guidance, it has assumed stable
margins, even next quarter. The rupee has closed at 44.11 or so in December, we
are assuming the same rate continuing for the next quarter. We believe that we will
be able to maintain the margins within the narrow band. The only factor, we have
to look for is a rupee-dollar rate."

Infosys has hiked its forex hedge to USD 1 billion from USD 470 million. Today
the rupee is trading at 40.56 down 0.0100 against the dollar.

Amongst the large-sized IT firms that have an ADR and trading weak, Patni
Computer is an exception. Patni has shown a strong momentum both on the BSE
and as an ADR.

There are news doing the round that a big chunk of Patni, India's 6th largest
software company, could be up for sale. This week a number of brokerages pointed
out that not just Patni, but a number of midcap IT companies are looking like
acquisition targets, reports CNBC-TV18.

VSNL and MTNL, the other two gainers are riding on the strong momentum seen
in the telecommunication space in India. According to Telecom Regulatory
Authority of India, TRAI, at the end of quarter ending December’ 06 Wireline
subscribers base is 40.3 Million.

As on March 31, 2006, the Wireless (Mobile and WLL) market has reached 149.62
million subscribers as against 129.54 million subscribers in the previous quarter.

During this quarter 20.08 million subscribers were added, thus recording a growth
of 15.50%. The total wireless subscriber base has grown from 75.94 million in
December 2005 to 149.62 million in December 2006

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 Indian ADRs 2007 Review: Telecom, Banks Pace Gains

The chart below tells us more than the performance of the U.S. listed Indian stocks
in 2007. What it tells us is just how strong the Indian economy is and the rise of the
Indian consumer.

The companies that targeted the local Indian consumers and the local Indian
market emerged as the clear winners in 2007.

Telecom and Banks led the way. However, technology companies that depend on
western markets such as United Sates under-performed during the year.

The two Indian Internet plays, Sify (SIFY) and Rediff (REDF), are looking more
like Lycos and Excite. These two stocks are showing no signs of life and I am not
sure 2008 will be any better. Internet in India still hasn’t emerged as people
expected it to. You can’t go just by numbers and growth figures. Broadband is still
a dream for most consumers in India. I am planning to write about this topic soon
so I will leave the bulk of my thoughts for that article.

Tata Motors (TTM) and Dr. Reddy’s (RDY) basically went nowhere but still
look promising for 2008 and beyond. Tata is still waiting on the Jaguar and Land
Rover decision and the Rs. 1 Lakh ($2500) car is supposed to be launched in 2008.

The newly listed Sterlite (SLT) has almost doubled since its IPO.

Now the best way to get exposure to the Indian Market was via an Indian ETF or
CEF. INP led the way with an 86% return in 2007.

Unfortunately, lots of great Indian companies are not listed in the United States
and the best way to play the Indian market might as well be INP. However, with
Sensex near an all-time high, you want to time your entry well.

With the Indian economy booming and as the ever increasing middle class
continues to see its purchasing power increase, the investing theme for 2008 is
pretty clear. Invest in Indian companies that target the local market rather then
ones that depend on western markets.

2008: The year ahead

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Find good entry points for:

• HDFC Bank (HDB)

• ICICI Bank (IBN)
• iPath MSCI India Index ETN (INP)
• Sterlite (SLT)

** Dividends not included

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** Dividends not included

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Indian ADRs 31-July – 2009

Company Price % Change

Dr. Reddy’s Lab 16.66 0.00 %

H D F C Bank(HDB) 96.15 3.64 %

ICICIBANK(IBN) 31.06 1.33 %

INFOSYSTECH.(INFY) 42.21 0.65 %

MTNL(MTE) 4.37 0.08 %

PATNICOMPUTERS(PTI) 14.90 2.53 %

REDIFF.COM(REDF) 3.09 0.08 %

SATYAMCOMP(SAY) 5.16 0.11 %

SATYAMINFOWAY(SIFY) 1.80 0.00 %

STERLITE IND. (SLT) 13.25 0.67 %

TATA COMM.(TCL) 21.38 0.62 %

TATAMOTORS(TTM) 10.48 0.32 %

WIPRO 14.39 0.25 %

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 Company: Wipro Ltd
In which stock exchanges are Wipro shares/ADRs listed and
what are the codes?
Indices that Include WIT
Symbol Name Last Trade % Change
^NYA NYSE COMPOSITE INDEX (NEW METHO 8,383.67 Feb 15 0.00 (0.00%)
^NYI NYSE International 100 5,583.94 Feb 15 0.00 (0.00%)
^NYL NYSE World Leaders 5,857.78 Feb 15 0.00 (0.00%)
^NYY NYSE TMT 6,137.90 Feb 15 0.00 (0.00%)

Prices
Date Open High Low Close Avg Vol Adj Close*
Feb 1, 2011 13.23 13.47 12.50 12.96 795,800 12.96
Jan 26, 2011 0.044 Dividend
Jan 3, 2011 15.56 15.78 12.83 13.18 1,036,100 13.18
Dec 1, 2010 13.90 15.69 13.77 15.47 513,000 15.42
Nov 1, 2010 14.37 15.33 13.44 13.69 467,000 13.65
Oct 1, 2010 14.83 16.81 14.18 14.28 724,800 14.23
Sep 1, 2010 12.99 14.89 12.83 14.46 436,400 14.41
Aug 2, 2010 13.79 14.21 12.48 12.83 402,500 12.79
Jul 1, 2010 12.00 13.66 11.75 13.60 343,000 13.56
Jun 23, 2010 5: 3 Stock Split
Jun 14, 2010 0.081 Dividend
Jun 1, 2010 20.53 23.00 11.92 12.00 545,300 11.96
May 3, 2010 22.46 22.79 18.84 21.15 805,700 12.57
Apr 1, 2010 23.56 24.74 22.34 22.46 659,400 13.34
Mar 1, 2010 21.75 24.29 21.75 23.31 576,200 13.85
Feb 1, 2010 19.84 21.76 19.10 21.62 755,200 12.85
Jan 4, 2010 22.70 23.99 19.65 19.69 1,606,900 11.70
Dec 1, 2009 20.01 23.00 19.67 22.27 889,600 13.23
Nov 2, 2009 17.36 21.15 17.00 20.00 990,100 11.88
Oct 1, 2009 17.72 19.53 17.08 17.15 1,125,900 10.19

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 Sep 1, 2009 15.75 17.99 15.23 17.95 816,800 10.67
Aug 3, 2009 14.60 16.40 14.00 15.75 742,300 9.36
Jul 1, 2009 11.84 14.75 10.62 14.52 710,800 8.63
Jun 29, 2009 0.048 Dividend
Jun 1, 2009 12.00 13.00 10.63 11.80 702,100 7.01
May 1, 2009 9.38 12.61 9.23 11.80 1,136,300 6.96
Apr 1, 2009 7.27 9.60 6.90 9.38 1,217,000 5.54
Mar 2, 2009 5.49 7.82 5.04 7.11 960,100 4.20
Feb 2, 2009 6.71 7.33 5.69 5.69 782,400 3.36
Jan 2, 2009 8.29 8.75 6.09 6.94 1,024,400 4.10
Dec 1, 2008 7.30 8.49 6.10 8.13 980,100 4.80
Nov 3, 2008 8.74 8.74 5.66 7.56 1,203,600 4.46
Oct 1, 2008 9.63 9.98 5.75 7.74 1,545,000 4.57
Sep 2, 2008 11.90 12.08 8.88 9.72 1,572,300 5.74
Aug 1, 2008 11.45 11.97 10.80 11.58 806,200 6.83
Jul 1, 2008 11.83 12.18 10.05 11.26 1,261,300 6.65
Jun 27, 2008 0.06 Dividend
Jun 2, 2008 14.00 14.53 11.73 12.18 781,200 7.19
May 1, 2008 12.89 14.38 12.54 14.16 693,200 8.29
Apr 1, 2008 11.63 13.20 10.89 13.00 1,007,300 7.61
Mar 3, 2008 11.49 11.84 9.85 11.53 953,300 6.75
Feb 15, 2008 11.64 12.60 11.38 11.54 821,300 6.75
* Close price adjusted for dividends and splits.

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